> Almost all of the world uses non backed fiat currency. The
> world has never seen this before Brenton Woods in 1971. Fiat
> currencies are fraud and theft.
I've heard statements like this quite a few times now, and it all sounds a
bit like hot air to me. It doesn't quite make sense. Would you care to
explain why you think fiat currencies are inherently and completely bad, as
opposed to non-fiat currencies? Such as gold-based ones, I presume?
I don't think gold-based currencies are backed by anything much better
either. Sure, you can have a ton of gold. But what good is a ton of gold? I
can't use it. There are only a few high-tech industries that make what could
be called constructive use gold, and the rest of it is used for displays of
vanity. To me, a ton of gold means about as much as a ton of hay.
*Unless* I can sell it to someone who *does* have a need for gold as a
material. Such as the aerospace industry, or the computer hardware industry.
These people will pay for gold as much as makes economic sense, compared to
alternatives - such as the use of other materials with similar
characteristics.
Of course, I can also sell the gold to someone who will sell it to someone
who will sell it as material to the industry that can use it. But at the end
of it all, any sensible basis for the price of gold is set by this same
industry: gold cannot be worth less than those people will pay for it, and
in the long term it cannot be worth much more either.
So, instead of a currency that is backed by the entire economy, you have a
currency that is backed by only a small branch of that economy.
How is that much better than USD?
Suppose someone finds a huge goldmine. Or someone discovers an asteroid that
consists of pure gold, and hauls it to Earth. Or someone discovers a way to
produce gold atoms cheaply. Or, more probably, someone finds a way to
convert major gold-using industrial processes to use another, cheaper
material instead. If your fortune is based on gold, it will depreciate in
value - big time.
If your fortune is backed by the economy as a whole, discoveries of more
efficient industrial processes or new goldmines don't have an influence. No,
scrap that - they do have an influence: more efficient industrial processes
mean economic growth, which makes the economy-based currency stronger.
I think the concept of currency backed by economy is good. After all, money
is compensation for hours spent working. Money ought to correspond to time
spent, not to weight of material acquired. So I think it does make great
sense to back a currency on economy, not on material.
My opinion is therefore that any bashing of "fiat currencies" a priori is
largely unsubstantiated. It may be true that a gold-backed currency would
survive an economic recession better than an economy-backed currency; but on
the other hand, an economy-backed currency is resilient to changes which
cause depreciation in the value of gold. The two types seem to be
complementary rather than adversary.
Regards,
denis
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